Foreign Exchange: Currencies Consolidate Ahead of Five Major Central Bank Meetings

March 18, 2025 - Written by Tim Boyer

STORY LINK Foreign Exchange: Currencies Consolidate Ahead of Five Major Central Bank Meetings

Stocks continue to swing wildly up and down, but currencies are stable ahead of five central bank meetings.

All central banks are expected to keep rates unchanged.

However, there will be plenty else to monitor and the pound also has the UK Jobs Report and the Spring Budget to factor in.

Stock markets have remained volatile while currency markets are much calmer with the euro, pound and US dollar all consolidating the moves made earlier in March. Although there is a raft of central bank meetings this week, the next major driver may be the tariff report due in the US in early April.

It seems the impact of the first round of tariffs may have been priced in. Stocks made a strong recovery in the US from last Thursday’s low and were already +3.6% higher by Monday. Retail sales data helped ease investor concerns that tariffs might already be dragging on economic activity. While the headline figure was slightly disappointing, the core retail sales “control group” (excluding autos, gasoline, building materials, and food services) rose +1.0% in February, outperforming the +0.4% market forecast. This pushed its three-month annualized growth to +3.8%, signaling resilient consumer spending.

This was a marked improvement on the readings from January and concerns over consumer spending was a major factor in the 10% correction in US stocks recently. Surveys showed that inflation expectations have surged since tariffs were threatened and sentiment has taken a dive. However, the hard data suggests the all-important US consumer is still in good shape.

Central Banks in Focus

The week ahead is busy withe central bank activity. However, the stasis in currencies in recent sessions reflects that little is expected in terms of policy changes.

The Fed meet on Wednesday and are 99% certain to hold rates steady as the “bump” in inflation means further cuts are unlikely until at least May. Between two and three cuts are expected in the remainder of this year, but the weaker the economy gets under tariffs and the lower the stock market goes, the odds for three or even four cuts will rise.

Also on Wednesday, the BoJ meeting is unlikely to deliver any major policy changes, although the bank’s hawkish stance will likely be underlined and they may start laying the groundwork for a hike in the summer. Yields have moved steadily high in Japan this year and have helped the yen recover some lost ground against the US dollar. However, it is also putting pressure on the USDJPY carry trade and as yields in the US and Japan diverge, more carry trade positions in the likes of US technology stocks are forced to close.

Thursday’s main event is the BoE meeting. This is again expected to bring no change to monetary policy, but the voting pattern could provide some importnat insights. As |ING note:

“There are visible signs of disagreement at the Bank of England on the pace of rate cuts required this year. But with wage growth and inflation remaining sticky, we expect the Bank to keep rates on hold this Thursday, ahead of the next rate cut in May.”

The meeting itself may not cause any sustained moves in ythe pound, and may be overshadowed somewhat by the UK jobs report out earlier that day. This is one of the last major economic releases before the Chancellor’s Spring Statement and the OBR’s updated forecasts next Wednesday. With a national insurance tax hike set for April, the latest UK unemployment rate will be closely watched. It has been creeping higher, reaching 4.4% in the three months to December 2024—the joint-highest level since August 2021.

Also on Thursday, Sweden’s Riksbank and the Swiss National Bank are also due to meet. Markets expect both to hold, although it looks to be a close call whether or not the SNB will cut again.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Daily Currency Updates